Austrian Economics answers many questions directly with easy to find evidence but when it comes to the National Health Service in the UK, can we prove that the free market could drive prices down through competition whilst raising the standards of medical procedures?
If so, can someone point me to some evidence to suggest that it would.
I should add, I have searched for hours through the mises journals and find it hard to get solid proof that socialised healthcare is the wrong approach.
surfpolitical
Austrian Economics answers many questions directly with easy to find evidence but when it comes to the National Health Service in the UK, can we prove that the free market could drive prices down through competition whilst raising the standards of medical procedures?
It’s supply and demand: too many people demanding too much health care treatment; not enough doctors. Either cease licensing requirements for health care professionals, so as to increase the supply of them; or impose price controls upon medical treatment and supplies, and doctor’s compensation, as a necessary string attached to state licensing.
If the free market is good for food, cars and mobile phones why wouldn’t the same be true for healthcare?
How Government Solved The Healthcare Crisis by Roderick Long is an interesting article on the topic.
Or let’s pose it the other way…If socialism in health care is so great, why don’t we do the same thing for food, cars, and mobile phones?
To get to the OP’s question, there is plenty of historical evidence to show that prices only go up over time (faster than inflation, anyway) in areas where government is most heavily involved. Competition always brings down price and increases quality. Someone may want to say “well of course medical care is more expensive…look how advanced it’s gotten!” But if technological advancement is the reason for higher prices, why do computers, mobile phones, televisions, video game systems, stereo systems, and all other forms of consumer technology constantly improve while the price constantly goes down? How is that possible???
For specifics on the medical industry, Milton Friedman gave an important lecture many years ago at the Mayo Clinic that is just as relevant today as it was then. (The full speech is presented in the last six videos in the list. The rest are clips from the lecture as well as the q&a)…
People in the US argue for socialized healthcare over free markets as if the US had free markets:
https://wiki.freecapitalists.org/wiki/Socialized_healthcare
I realize you’re in Britain, but I wanted to point that out.
You say that you’ve checked out the Mises website and I trust you, but to make sure I’ll throw out these links:
There are many who believe the US has a free market healthcare system. Nothing can be further from the truth. The industry has been semi-socialized since the 60s with the introduction of Medicare and Medicaid. Leaders back then have warned:
“[I]f you don’t [stop Medicare] and I don’t do it, one of these days you and I are going to spend our sunset years telling our children and our children’s children what it once was like in America when men were free.” - Ronald Reagan 1961
“Having given our pensioners their medical care in kind, why not food baskets, why not public housing accommodations, why not vacation resorts, why not a ration of cigarettes for those who smoke and of beer for those who drink?” - Barry Goldwater 1964
Described Medicare as “socialized medicine.” - George HW Bush 1964
Quotes were from wikipedia.
I have used the NHS as I am British. For the amount that I spend on national insurance and income tax, I could afford a better private insurance. GPs especially are ineffective and less efficient in my opinion. In SA you pay as little as £15-20 to see a GP and that includes all types of checks and can last as much as 15-30 mins if required. The British GP is reluctant to take blood tests and post them off to a research lab. A lot of the activity is dictated by its budget and not by the patients requirements. In the UK the private healthcare without insurance is far too expensive, is this largely due to the government nhs which has a £100 million+ budget, this pushes up prices of the private health care. If people are already paying for the NHS through taxation they are far less likely to have insurance. Unless they have a lot of money. Upper middle class level of income. For the majority of the population people use the NHS. Due to this the demand of healthcare is extreme because a lot of people see it as “free” when healthcare costs money and doctors demand a lot of money etc. As people see it as Free they go to the doctor even in instances that they would think twice about if they had to pay £20. Because it is free people go to the doctor for more frequntly than the market demand, this increases market demand articifically. This also creates a cutlure within the NHS that is very reluctant to treat problems that otherwise might have been treated if the patients were on a private insurance or private based health care system.
After my experience with the NHS i think a good solution or compromises that i would suggest in this instance would be to privatise the GP facilities completely and allow them to compete FREELY. This would allow for prices to come down due to competition between their services. Better doctors could charge more based on their reputation.
Although I am against government hospitals the compromise i would suggest to transistion to a better healthcare system would be to retain all current nhs hospitals and use them only for emergencies and operations. But at the same time move a lot of the functions to the GP level from the hospitals to the private GP.
To add to this, I think the reason people think of such government-provided services as “free” isn’t strictly because they’re tax-funded. In part, I think it’s because new or expanded government services typically don’t come with a proportional tax increase. The other part is that, when they do come with tax increases (or when taxes increase later), the new taxes aren’t levied on everyone equally - some people (typically wealthier people) are taxed more than the rest.
Price is just one dimension of the problem and focusing solely on price can lead to skewed conclusions. If the government wanted to, they could provide health-care for absolutely free, with no tax surcharge… all they have to do is stop spending that money on other things. Clearly, the free market cannot offer health-care for free, so the government always “wins” in such a theoretical comparison.
But the fact is government health-care isn’t and can’t be free of cost; in nationalized health systems, it’s just paid for at a different time and place than the point at which it is consumed.
The larger problem of which price is just a symptom is the problem of calculation. How many doctors does a society need? Do they all need to have the same level of education? Should all medicine be done on the basis of laboratory research or should some forms of medicine focus on subjective factors that are not amenable to laboratory measurement? What, fundamentally, makes health care so cost-intensive compared to, say, automobile manufacture or life insurance? Everybody has their opinions on these kinds of questions - including the mainstream health establishment and its political ecosystem - but the fact is that nobody actually knows the answer to these questions for the same reason that nobody knows what the price of oranges in Mobile, AL should be.
The calculation problem not only affects price but what is produced. The most notable aspect of life in the Soviet Union was not the “high prices” of goods and services but their composition as compared to, say, the US. In one town you might have a glut of water crackers and cod liver oil that nobody wants, while the basic staples are not available. The only information that the entrepreneur has besides his own hunches about what product to bring to market at a profit is price information. When the price of a widget is very high compared to its economic substitutes, there is headroom for finding a cheaper way to produce the widget and draw away market demand from the substitutes, or to introduce a better substitute that is cheaper than the widget that everyone wishes they could have and more useful than the substitutes they have to settle for instead. This is as true in the health industry as it is in any other industry.
Billions of dollars are invested into medical research both by government and private sector but what reason is there to believe that we are spending this money wisely? Why is cancer treatment research so important? Perhaps more research into common ailments such as colds and flus would be in higher demand but for the distorting effect of regulation and central planning in the health industry and health research. I have no idea which is more important. But what I do know for sure is that no one else knows either which because market demand (consumers signaling to producers what products they want more or less of through prices) is not allowed to freely operate. Hence we’re flying blind.
We can conclude as a theoretical point that the government must necessarily increase the cost of health-care to the public because cost can only be measured relative to consumer preference. The whole point of having the government intervene to produce health-care is to thwart - to one extent or another - consumer preference.
Clayton -
Good analysis, though I thought that the calculation problem was centered around the lack of market for capital goods…?
No capital goods are required in the production of modern medical equipment and services? Think of transporting a heart on ice for transplant… you can’t exactly send it by horse-and-buggy. A jet plane is a good that requires an extremely deep capital structure.
Clayton -
Having read the thread, the general argument against socialized healthcare seems to be that because the market is best at delivering a service in one industry, it must be best at delivering it in the healthcare industry too. You are all forgetting that markets are not the same, there are different problems to overcome in healthcare than food for example. There are clear information issues that need to be addressed for a start, add on to that perverse incentives too. It’s not as simple as saying the market works best for X, so it must work best for Y.
That’s not a terrible argument but I don’t think that’s really what is being argued here and certainly not my argument.
Not at all. The problems with central planning hold regardless of the good or service you are trying to centrally plan so it doesn’t matter what “type” of market we’re talking about… centrally planning it will lead to the problems that always arise with the attempt to engage in central planning.
Not at the level of abstract which economics deals with. Food is a good. Drugs are goods. A doctors visit is a service (good). All these are scarce. It is the fact of scarcity that drives economic phenomena. No one pays for air because air is not scarce.
Second opinions, patient rights groups, independent medical consultants, etc. etc. This is not a real problem.
Please name them. I agree they exist but I believe when you dig into the specifics, you will find that regulation and government intervention does the opposite of alleviating perverse incentives; it makes them worse.
The market is the most efficient way to solve all the problems that you’ve presented and I think any problems that can be thought of. The reason is that the market permits the unhampered spread of costly information. We don’t need a government regulator to fix the price of apples… farmers, wholesalers, retailers and consumers work it out on their own and they arrive at the most fortuitous possible price of apples - the price that reflects the economically relevant elements of differentiation for apples (variety, grade, season, transport and production costs, etc. etc.)
The proponent of government intervention should not enjoy the default position in any argument. It is the proponent of government intervention who is proposing to upset the harmonious status quo that will emerge in the absence of government meddling or threats of government meddling. You need to show that threatening violence against people for engaging in otherwise lawful acts improves society. This is a much higher hurdle than it appears at first glance. In fact, it is definitionally impossible to leap if you begin with a sound approach to analyzing human action. By definition, the need to unilaterally threaten overwhelming force proves that whatever decision is being imposed is non-optimal.
Clayton -
Because regarding health care it’s much more plausible that a free lunch would appear out of thin air. Everyone can kind of understand that it requires one car to be produced for one person to have one car. If the government declares cars to be free, they won’t suddenly be abundant. Health care is different, it is not seen as scarce in the same way, but rather as kind of a ubiquitous energy that just sort of floats around. It’s not a good or service, but an abstract. The belief is that we simply have to provide people with “access” to health care, then they can consume it in abundance. Thus requiring people to pay for it is just arbitrary meanness.
The implicit argument of the NHS crowd is that lack of ability to pay for stuff causes scarcity, so if we simply abolish the need to pay for health care nobody will be unable to pay for it and it will be abundant. This argument is refuted by simply stating it explicitly.
This is exactly my point. People always make straw man arguments and I’d like to back it up with proof. Comparing the NHS to the US is easy, comparing it to France, Singapore? Is there anywhere that practices free market healthcare?
My point is that we can all say it would be better through logic and comparing it to different scenarios of how the free market have drove prices down and the competition higher, but it would be nice to have some stone wall facts or systems of practice.
You mean you need examples? Well that’s the problem, we can’t illustrate a comparison across possibilities by looking at examples. You don’t know the benefits of the choice you didn’t make.
Socialized medicine more or less amounts to a huge price controlling scheme, this is what makes it appear ‘cheaper’. But anyone mildly educated in economics will know that price controls lead to shortages. Like for example nobody producing any new drugs and medical technology because there’s no money in it. So if these socialized health care systems were isolated, then they’d simply have stagnating service quality and you’d quickly see how they fail in comparison to a free market. But with the US around, socialized systems can simply import the technology that the US produces. Thus in a comparison between countries, they have roughly the same service quality, and it appears as though they provide the same for less, i.e. that socialism created a free lunch. But this comparison leaves out that they’re being subsidized, which is the real reason they are ‘cheaper’. It does not show us how well they would be off if they produced technology too, i.e. if medical technology was 50 years further advanced, and even the poorest would be better off than the richest are today.
I did mention South Africa in my post as an example of a relatively cheap private healthcare system. I would argue good value for money healthcare system, especially if you have medical insurance. But you can get over charged as in any industry.
But healthcare will always be expensive as there are so many license requirements in practicing medicine. If people have had to study for 7 years and have $90000 debt, they are going to want to charge a high price for their time. If it was made easier and cheaper to become a registered doctor, say for example self taught medical doctors, not surgeons or specialists. Just a GP level doctor, local doctor level. Then this would increase the amount of Doctors within a certain region and people would select the best doctor based on their reputation and that meets their price level. But there are other hurdles and regulations for starting a doctors practice.
One example of why private healthcare is better. If you have a problem with your body that is a problem but not defined by the state as serious enough then they will refuse to operate. In both instances you are spending money, one through taxes and one through private medical insurance. If you have private medical insurance and you have a deformaty of the rib cage that is hardly noticable but you think it effects you negatively and want to get it fixed, if you spend enough money you can get it fixed. But within a socialist healthcare system they will operate only if they decide that it is a risk to your health, otherwise they will classify it as cosmetic.
In South Africa if you go to a private specialist and you want an operation he tells you that you can go to the private hospital for say R5000 on a tuesday or a thursday of every week. For R2300 you can go to a government hospital on a monday and friday of every week. You then tell the doctor which date and price you would like to chose. He then looks to see if he has a slot on that date and if not he will suggest the next closest one which would usally be within a week. It would usually be the patient that decides to do it a later date, so not due to over capacity. So the same doctor/surgeon just at a different hospital.
In the UK when you go for surgery. Firstly you have to try and get an appointment at the local GP which sometimes can take a few weeks and you would have more luck taking a day off work and walking in, in the morning. Because in the UK you can not make appointments for the mornings and they are usually fully booked up for weeks. So you finally get to speak to a GP then you have to convince the GP that you have a problem, literally. Then once you have done that they make another appointment and you have to speak to another GP at the premises that actually approves of the forwarding to specialists. This usually only takes a few mins. Then you get to chose the appointment out of a list of 3-5 hospitals around your area, ranging from 6-12 weeks in advance. To see a specialist. Then when you do get to see a specialists he demands a cat scan which is normally another 4 weeks wait. Then you wait for the results which can take a few weeks and then you have another appointment with the specialists which can take another 2-3 weeks or more. Then you have book the surgery and this can be anywhere between 3-9 months. Then it depends on luck if the quality of the hospital is good or bad. Some are far worse than others. Choice of hospitals was only recently introduced may I add which is a big improvement. As now you can at least chose based on reputation, if you are aware of it.
Wow. What are the differences between government-funded healthcare in South Africa and the UK’s NHS? Does the former just have fewer regulations than the latter? Or what?
when it comes to the National Health Service in the UK, can we prove that the free market could drive prices down through competition whilst raising the standards of medical procedures?
The demand for healthcare, like the demand for military/sovereignty protection, remains relatively price-inelastic: People would and do mortgage their financial futures away to buy for themselves an extra year of life. So long as this natural “distortion” abides, the prices for effective healthcare treatments will always be bidden high.
As I stated previously, ridding the healthcare profession of unnecessary licensing requirements would increase the number of professionals–but likely would not meet your second requirement, that the standard of medical procedures be raised as well. Still, having surveyed physicians within my own family, I’m aware that a good deal of what is taught in medical school, if it is unrelated to their chosen field, goes in one ear and out the other; such that the length of the training process could be safely, significantly foreshortened.
It would be difficult to point to any real-world examples of a healthcare system working well in a modern state, because so many liberal democracies rely upon the invisible umbrella of American might to “subsidize” their socialized healthcare expenditures. Were every nation forced to provide in full for their own guarantee of sovereignty, perhaps none could afford universal healthcare.
So perhaps the best argument should be one resting upon principle, not pragmatism. Should you be forced to provide healthcare for anyone else, when you might not even elect such a treatment for yourself? This is inequality, servitude. Unlike the protection of our common sovereignty, we do not all benefit equally from healthcare, because we do not all have an equal need for the services provided. So it’s best left paid by those who need it, between whom the sharing of pricing information and reputation/referrals might exert downward competitive pressure upon local prices.
But why is the burden of empirical proof on the proponent of laissez-faire? And besides, we can point to thousands of years of human experience in the absence of government meddling. Medical services were produced and consumed on the same rules of fair play that hold in any other line of business until very recently. While the technology of medicine itself was less advanced, the point is that the most advanced treatments were made available to those who could afford them. Today, NHS and similar health-nationalization schemes have not increased the absolute availability of the most advanced treatments - they simply claim to distribute them “more fairly”.
So, this isn’t really about prices or production, it’s about social justice. And that’s my point: the social justice proponent is not working off of any sort of empirical facts or evidence. He’s just making shit up. By contrast, the proponent of laissez-faire isn’t just making shit up… people buy and sell the services that are demanded by consumers at prices that are arrived at through the market mechanism and this is the case with health-care as for any other service (we have the “stone wall facts” of history to back that claim up).
First, you have to decide whether your concern is prices and efficiency or social justice. Then we can decide how to go about the discussion.
Clayton -